Will being an authorized user help my credit score?
Being an authorized user on someone else’s credit card can be a beneficial step towards improving your own credit score. However, it’s important to understand how this process works and the potential impact it can have on your creditworthiness. In this article, we will explore the advantages and disadvantages of becoming an authorized user and whether it can truly help boost your credit score.
Understanding the Role of an Authorized User
An authorized user is someone who is allowed to use another person’s credit card but is not responsible for repaying the debt. This arrangement is often seen in family settings, where a parent may add a child as an authorized user to help them establish credit. While the primary cardholder is responsible for the charges made by the authorized user, the credit card issuer reports the authorized user’s activity to the credit bureaus, which can affect their credit score.
Advantages of Being an Authorized User
1. Building Credit History: One of the primary benefits of being an authorized user is that it can help you establish or improve your credit history. If the primary cardholder has a good credit score and pays their bills on time, this positive behavior will be reflected in your credit report.
2. Credit Utilization Ratio: The credit utilization ratio is a significant factor in determining your credit score. By being an authorized user, you can benefit from the primary cardholder’s low credit utilization ratio, which can positively impact your own score.
3. Access to Credit: As an authorized user, you can have access to a credit card without the responsibility of repaying the debt. This can be helpful if you need to make purchases or rent a car that requires a credit check.
Disadvantages of Being an Authorized User
1. No Control Over Spending: As an authorized user, you have no control over the spending habits of the primary cardholder. If they accumulate debt or miss payments, it can negatively impact your credit score.
2. No Direct Responsibility for Repayment: While you are not responsible for repaying the debt, the negative consequences of late payments or high credit utilization can still affect your credit score.
3. Limited Impact on Credit Score: The impact of being an authorized user on your credit score can vary. If the primary cardholder has a long credit history and a good credit score, your own score may benefit significantly. However, if the primary cardholder has a poor credit history, the impact on your score may be minimal.
Conclusion
In conclusion, being an authorized user can help your credit score if the primary cardholder has a good credit history and manages their credit responsibly. However, it’s important to consider the potential disadvantages and ensure that you are not taking on unnecessary risks. If you’re considering becoming an authorized user, discuss the arrangement with the primary cardholder and understand the terms and conditions before making a decision.
